Key Lessons From The Gurus

In an interview with, Validea CEO John Reese discusses which of his “Guru Strategies” has performed best over the long haul, and some of the key lessons he’s learned in implementing his models, which are based on the approaches of some of history’s greatest investors.

“The models still continue to work” years — and even decades — after being developed, Reese says. “I have actually been keeping track of the portfolios since 2003 based upon the original strategies. Eleven out of 12 models have continued to outperform the S&P 500, some have outperformed the S&P 500 by a factor of five to one.”

Interestingly, one of the top performers has been the Benjamin Graham-inspired model, which is based on the approach Graham laid out more than 60 years ago. By focusing on undervalued stocks with strong financials and fundamentals, the strategy has produced double-digit annualized returns since its 2003 inception, while the broader market has struggled. And fundamentals are what most of Reese’s models key on. “For the most part, the successful investors over a very long period of time have been the people who look at the fundamental values of the company” rather than technicals, he says.

Reese also discusses how using multiple models to assess a stock can enhance returns. And he says that the most common variable used by the gurus he follows is one you might not expect: the debt/equity ratio (or some variation of it). “They sort of consider that poison to a company, and they want to see low or sometimes even no debt to equity,” he explains.